Pro1 – A good night sleep – peace of mind that you are protected against inflated hikes in the interest rates.
Pro2 – Steady payments – same payment every single month so you know exactly where you stand financially.
Pro3 – You control your budget. You know exactly what you need to pay out so you can budget easier.
Pro4 – Eliminates risk – A fixed rate mortgage eliminates the fear and anxiety of what your mortgage payments could rise to if the interest rates were increased.
In 1988 the interest rate increased by 10% that meant for some borrowers not on a fixed rate mortgage their monthly payment increased to more than double. That is the kind of risk you need to avoid.
Pro5 – Low cost – Besides the security of a fixed rate mortgage you are generally offered this type of mortgage at a lower interest rate than the SVR (Standard Variable Rate).
There are your pros now get ready for the cons.
Con1 – You get a redemption penalty slapped on. These penalties are usually around 6 months mortgage payment if you have to move house. Not nice!!
Con2 – Prisoner in your own home – A redemption penalty is activated if you want to move home and move lenders. If the redemption penalty is a load of money it could entrap you in your own home like a prisoner.
Con3 – Cash loss. You will have to pay around 6 months mortgage payments as fees if you want or need to move house. A lot less to put down on the new house than you’d like.
Con4 – Sudden increase. At the finish of your fixed rate mortgage term you go on the lenders SVR. This could be a bit of a shock if rates have risen.
Con5 – Set up charges – There is usually a set up charge for a fixed rate mortgage that you will have to pay the lender.
Con6 – Interest rate changes. If rates can go up, they can drop too. It’s not nice if you are paying more (sometimes much more) than those on SVR mortgages.
Summary: More cons than pros but despite that my advice is to go for a fixed rate mortgage if you can be certain that you won’t need to redeem the mortgage before the fixed period ends. If so then you can give yourself peace of mind with a fixed rate mortgage.
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